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Egypt facilitates investment opportunities in Africa

The Egyptian government plans to create an investment risk insurance fund to encourage Egyptians to invest more in the African continent and to help strengthen and deepen relations with African nations.

Egypt is eying closer cooperation with African nations by pursuing new investment opportunities in them for Egyptian investors. The African continent, rich in human and natural resources, is currently experiencing extensive economic activity and a flow of large investments from numerous countries. Despite this uptick, concerns involving security and financial risks remain, keeping some investors at bay. To assuage such concerns, the Egyptian government plans to establish an investment risk insurance fund to protect those willing to put more money into the continent. 

On Oct. 22, in a meeting with parliament’s African Affairs Committee, Investment and International Cooperation Minister Sahar Nasr highlighted the government’s keenness to engage on the challenges that must be overcome to strengthen relations with other African countries and to boost investment in them. She asserted that a risk insurance fund would stimulate Egyptian investment in Africa, and members of parliament and economists hailed the prospect. 

“It is a new step by the Egyptian government on the path of economic development in order to join the economies of the major countries, which require protection of investors from the risks hindering their investment projects on the African continent,” MP Hesham Magdi, a member of the African Affairs Committee, told Al-Monitor. “The political leadership is keen to cooperate with African countries in all areas, especially given that these countries are rich in natural [resources] potential. Thus there is a need to establish such a fund to stimulate young Egyptian investors to delve deeper into Africa and invest there to guarantee a safe environment for them.”

Magdi added that the fund would cover many of the risks that investors might face, such as natural disasters and security disturbances.

Jamal al-Bayoumi, secretary-general of the Arab Investors Union, told Al-Monitor, “The step of establishing an investment risk insurance fund is required and important for Egypt in light of the improvement in its economic situation and the growth of its investments at home and abroad. Countries with large investments abroad have this fund.” 

In October, Moody's Investors Service upgraded its outlook for Egypt's banking system from stable to positive, noting improvement in the operating environment due to structural reforms demanded by the International Monetary Fund appearing to put Egypt on a path to “sustainable and comprehenive growth.” AhramOnline quoted Moody's Assistant Vice President Melina Skouridou as saying, “Increased domestic private sector investment, large infrastructure projects, as well as higher exports will drive economic growth and credit demand.”

Bayoumi said there are promising opportunities in the African construction sector for investors and further remarked, “Investing in Africa has two positive aspects. The first is economic, and the second provides Egypt with the soft power of presence and compatibility in these countries.”

Heba Salama, head of the Regional Investment Agency (RIA) of the Common Market for Eastern and Southern Africa (COMESA), is reported as having told the African Business Magazine that in 2017 Egypt led COMESA's 21 members in direct foreign investment in Africa, with $7.4 billion, or 42% of members' total investment. Founded in 1994, COMESA is a free trade area stretching from Tunisia to Swaziland. Egypt joined it in 1998.

Salama said that trade between Egypt and other African countries in 2016 totaled $5.4 billion, consisting of $2.9 billion in exports and $2.5 billion in imports. Egyptian exports included plastics, aromatic oils, sugar and sugar confectionery, machinery, electrical equipment and spare parts, natural or artificial pearls, precious and semi-precious stones, mineral fuels, oils and distillates, and vegetables, fruits and nuts.

Speaking to Al-Monitor, MP Passant Fahmy, a member of the Economic Committee, noted that Africa has been growing rapidly, making it one of the largest and most promising markets and one with a potentially great future. She is a proponent of establishing an investment risk fund. “Such a fund will raise the appetite of many Egyptian investors to be there, because it will greatly ameliorate their fears,” she told Al-Monitor.

On Oct. 30, President Abdel Fattah al-Sisi took part in an Africa investment summit held in Berlin at the invitation of Chancellor Angela Merkel. The event, attended by 11 African leaders, aimed at identifying ways of turning Africa into an attractive hub for investment. The meeting was a part of the Compact with Africa, an initiative that Merkel launched in 2017 to strengthen private investment in Africa.

Egypt is among the 11 African states that have joined the initiative thus far. The others are Benin, Côte d’Ivoire, Ethiopia, Ghana, Guinea, Morocco, Rwanda, Senegal, Togo and Tunisia. During the Berlin meeting, Merkel encouraged German companies to explore Africa's economic opportunities, in part because economic development there could help stem undocumented migration to Europe, an issue that has generated political and societal turmoil in Germany.

Since 2015, Germany has taken in more than 1 million migrants from troubled states, such as Syria, Iraq and Afghanistan. Thousands have also arrived from African countries, including North Africa, as economic migrants and refugees. “For many years we have been very focused on Asia,” Merkel said. “I think that in [the] future, we should turn our sights more on Africa.”

Fahmy remarked, “The [Egyptian] president’s participation is regarded as an affirmation of the level of importance Egypt attaches to furthering cooperation between African countries and the countries of the G-20 in different developmental fields.” She also noted the added importance of Egypt’s one-year chairmanship of the African Union in 2019, during which time Egypt will try to increase cooperation and draw closer to African states.

During Dec. 8-9, Sharm el-Sheikh will host the government-sponsored Africa 2018: Business for Africa and the World, a business-to-business and government-to-business forum. The event is being organized by the Ministry of Investment and International Cooperation, with input by RIA, to develop intra-African investment and promote greater economic integration through increased investment flows into Africa in all sectors.

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